IG Market Analyst Chris Beauchamp said: "Talk of a new Cold War was always rather excessive, but fears of a renewed freezing over in east-west relations have diminished today, on signs of co-operation in the investigative efforts in Ukraine. Add to that the restart of US earnings season after Monday's quiet session, and markets have taken their cue to rally once again."

Tensions have eased following a move by pro-Moscow rebels to hand over the black boxes from flight MH17 and allow the train carrying the bodies of the victims to be transferred into the Ukrainian government's hands.

However, the conflict in Gaza has continued, leading to the killing of dozens of Palestinians and Israeli soldiers in recent days, with the death toll said to have now exceeded 600 during the two weeks of clashes. At least five people were killed today by an Israeli strike on a hospital.

UK factory orders slow in July

Focusing back on the UK, factory orders slowed more than forecast in July, the Confederation of British Industry (CBI) revealed earlier today.

The CBI survey's monthly total order book balance eased back to +2 from +11 in June, missing expectations for a balance of +8. In the quarter ending in July, total new orders increased to +24 from +21 the previous quarter, the highest level since 1995.

Tomorrow's session will see the release of the Bank of England's minutes from its July meeting. The minutes will detail how the Monetary Policy Committee voted when they decided to keep borrowing costs at a record 0.5% earlier this month.

ARM leads upside after strong Q2

Chip designer ARM Holdings was a high riser as it delivered a confident outlook, hailing a "healthy pipeline of opportunities" following strong licensing results helped profits beat expectations in the second quarter. The tech group, which makes processors for smartphones and tablets, said pre-tax profit in the six months to June 30th rose 9% year-on-year to £94.2m, ahead of the £91m estimated by analysts.

Mining stocks were also on the rise on the back of renewed risk appetite, as investors shrugged off declining metal prices. Anglo American, Antofagasta, Rio Tinto and BHP Billiton were making decent gains. Anglo rose despite saying that the bulk of its iron ore division, which accounts for around half of group profits, saw underlying earnings drop 28% in the first half.

Heading the other way was Royal Mail after tougher competition in the corporate market in the first quarter resulted in a weaker-than-expected performance in UK parcels, meaning full-year revenues are likely to be lower than forecast.

Supermarket giant Tesco was also in the red, completely erasing gains made on Monday after investors welcomed the resignation of its Chief Executive Philip Clarke. However, it appears that the market was finally reacting today to a simultaneous profit warning from the grocer on the back of a "challenging" second quarter.

Pushing the stock further south were Deutsche Bank and Barclays, which cut their respective target prices. Rivals Wm Morrison and J Sainsbury were also lower.

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